A risk-free Monday is gearing up to start the week, with stock futures falling and the 10-year yield falling back to 1.5%.

And we’ll have jobs numbers at the end of the week that should be solid, and the Federal Reserve will certainly be watching. A nervous market is therefore understandable.

Our call of the day comes from Mike Wilson, chief investment officer at Morgan Stanley, who offers a bucket of reasons to stay defensive in this market.

“The quality leadership of large caps since March signals what we believe is about to happen: slower growth and tighter financial conditions. The question for many investors now is whether the price action has already factored in these fundamental results. The short answer, in our opinion, is no, ”Wilson said, in a Sunday note to customers.

Wilson’s list of reasons includes growth concerns in China that will likely come from struggling real estate giant Evergrande (more details below) – not fully addressed. And then there’s the surprising speed at which the Fed expects the Fed to shrink – by the middle of next year – in “clearly hawkish change”. The market fallout that followed – rising bonds and yields, falling stocks – are telling, he said.

“In short, higher real rates should mean lower stock prices. Secondarily, they can also mean value versus growth, even if the overall stock market goes down. This creates a doubly difficult investment environment given the positioning of most investors, ”he said.

A final defensive signal has come from a surprising recent challenge to this “buy down” strategy – “the most powerful compensation for a large correction in the S&P 500 this year,” Wilson said.

“After the drop and rally from Evergrande, stocks probed lower and broke previous lows, making it the first time buying the bear didn’t work, simultaneously violating support important technique, ”he said, providing the following chart.

Morgan Stanley / Bloomberg

As to what to do with all of this, Wilson said the team favored a ‘bar’ of defensive sectors – healthcare and commodities that should hold up as earnings revisions begin. to be under pressure from slower growth and rising costs. Add financials, which benefit from a rising interest rate environment.

Consumer discretionary stocks, meanwhile, are “particularly vulnerable to a return on investment from last year’s overconsumption demand.” In this area, Wilson prefers services to goods for a remaining pent-up demand, while some tech stocks are threatened by a fading work-from-home dynamic. Semiconductors are the biggest concern, he said.

The buzz

A sufficiently loaded data week begins with factory orders later and ends with payroll numbers. Economists expect a big jump for September, of around 485,000, after August was well below.

No more problems with the Fed? Vice President Richard Clarida traded stocks just ahead of a central bank statement on the pandemic, Bloomberg reported.

Tesla TSLA,
+ 4.06%
Shares are taking a shock from the record number of deliveries – 241,300 vehicles – in the three months ending September, ahead of 139,593 a year ago and above expectations, the automaker said on Saturday. electric cars.

While mainland Chinese markets are closed until Friday, Hong Kong’s Hang Seng HSI Index,
fell 2.1% as struggling China’s stocks Evergrande 3333,
were suspended after announcing he could sell his property management unit.

By mid 2022, we may need a new vaccine to fight COVID mutations, said Uğur Şahin, CEO and co-founder of vaccine maker BioNTech BNTX,

A Facebook FB,
The whistleblower said the company prematurely deactivated protective measures designed to end political disinformation, following last year’s presidential election, paving the way for the deadly riots on Capitol Hill in January.

Further on China, U.S. Trade Representative Katherine Tai is expected to say China has failed to comply with a Phase 1 trade deal reached under the administration of former President Donald Trump, in a speech Monday.

The global elite have been hiding billions in properties, yachts and other assets for years, according to the “Pandora Papers” report of the International Consortium of Investigative Journalists.

Read: With supply chain disruptions here to stay, these are the best places to invest

Check out the new MarketWatch podcast: Best New Ideas in Money, where MarketWatch Content Manager Jeremy Olshan and economist Stephanie Kelton chat with business, tech and finance leaders about the next phase of the money evolution. Listen now.

The steps

US ES00 equity futures contracts,

+ 0.16%

have demoted, led by technology. The 10-year Treasury yield TMUBMUSD10Y,
was up 2 basis points to 1.487%. European equities are stable. In terms of energy, the prices of natural gas NG00,
+ 7.51%
are up about 3.5%. Oil markets will monitor the OPEC + meeting, with Reuters reporting that the group will maintain an existing deal to add 400,000 barrels of oil per day in November.


The Wolf Street Blog examined detailed second-quarter Fed data on household wealth for the 1%, 2%, “next 40%” and “bottom 50%,” which were released on Friday. The conclusion is that Fed policy, the blogger said, has “exploded the already gigantic wealth disparity during the pandemic.”

Plus: “It is not households in general that have benefited, but only the richest households with the most assets. The more assets they had, the more they benefited, ”the blogger said.

Here’s another look at that:

Random readings

Scientists who understand how we feel and touch temperature win the Nobel Prize.

A little-known secret ingredient in sweet corn: insect repellent shellac.

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